Congress passes Medicare bill

Healthcare Financial Management, Jan, 2004

On November 25, the Senate approved the final version of a bill containing the broadest expansion of the Medicare program since its inception 38 years ago.

The president earlier praised the compromise bill as a "good piece of legislation" and signed it into law (PL 108-173) on December 8. The House passed the measure on November 22.

The bill is titled the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and its most visible provision is a voluntary prescription drug benefit to seniors beginning in 2006, with additional federal subsidies for drug coverage offered to certain low-income Medicare beneficiaries. Under the bill, senior citizens would be able to purchase a Medicare-backed discount drug card to reduce their costs for medications in 2004 and 2005.

The bill also provides for a limited experiment in competition between private plans and traditional Medicare and a host of provider payment revisions, such as eliminating reductions in payments to teaching hospitals, relief for rural hospitals, and increases in physician payments.

The bill provides $25 billion in payment improvements for providers. Key provisions for providers include:

* Hospital payment updates will be set at full market basket for FY04 and the update at full market basket will continue for 2005 through 2007 for those furnishing quality data to CMS. However, the update will be market basket minus 0.4 percent for those hospitals not providing quality data to CMS.

* Disproportionate share payment caps for rural and small urban hospitals will increase from 5.7 percent to 12 percent in 2004.

* The labor share of the wage index will decline from 71 percent to 62 percent for low-wage areas.

* The CY04 4.5 percent reduction to the physician fee schedule will be replaced with a 1.5 percent increase for 2004 and 2005.

* Physicians delivering care in areas with few physicians will receive a 5 percent bonus payment for three years.

* There will be a moratorium on therapy caps for 2004.

To get HFMA's highlights of the bill and a link to the full text, go to www.hfma.org/resource/focus_areas/medicare/400246.htm. To get background en the bill in the Heuse Ways and Means Committee "Medicare Resource Kit," go to www.waysandmeans.house.gov/Links.asp?section=47.

For commentary on the bill, see "Winners and Losers under the New and Improved Medicare," by Jeanne Schulte Scott and "Medicare Gets Much-Needed Shot in the Arm" by Newt Gingrich on pages 28 and 58, respectively, of this issue.